KordaMentha Real Estate's Property exposures update provides a snapshot of APRA's latest property exposure data on the commercial and residential sectors.
The Australian Prudential Regulation Authority ('APRA') recently released its latest quarterly property exposure data for domestic and foreign Authorised Deposit-taking Institutions ('ADI's').
The Property exposures update - March quarter 2019 provides a snapshot of APRA's quarterly property exposures data on commercial and residential sectors.
ADI exposure to new interest only residential loans remain substantially below long term levels, whilst early signs of recovery may be evident in Land and 'Other Residential' (apartments and high-rise accommodation) exposure.
Interest-only residential loans remain low
APRA's lending restrictions implemented in March 2017 limited ADI new interest-only lending to 30% of total home loans issued. The share of new interest-only loans contracted considerably (-20.8%) over the 12 months to March 2019 (over double the contraction for the 12 months to December 2018). APRA lifted the interest only lending restrictions on 1 January 2019 with little impact evidenced in the March 2019 quarter.
Recovery in Other Residential and Development
In March 2019, there was an increase in exposure to the Land Development/Subdivisions and Other Residential sectors indicating a slight improvement in financiers' general aversion to the development market. Exposure to Land Development/Subdivisions grew 0.9% in the March 2019 quarter compared with a 3.0% contraction in the December 2018 quarter. While year-on-year exposure decreased 1.1%, there are signs of growth with Residential exposures increasing by 1.3% in the March 2019 quarter.
Retail exposure outpaces Tourism and Leisure
Retail was the second fastest growing sector in the March 2019 quarter despite the headwinds and structural changes confronting the retail industry. Retail exposure outpaced Tourism and Leisure exposure with growth of 2.6% recorded during the quarter, compared with 0.7% growth in the Tourism and Leisure sector. Retail currently comprises 25.4% of all commercial property exposures by sector, down only slightly from 25.7% at the same time last year.
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